The macroscopic properties of metallic materials depend on the state of the grain microstructure. Recrystallization acts as one of the most important mechanisms in the evolution of the microstructure and hence also of the macroscopic properties. This paper presents a mesoscale model of microstructure evolution due to recrystallization, based on a level set formulation employed in a finite element setting. The use of level sets to represent grains and grain boundaries in polycrystal microstructures is a relatively recent development in computational materials science and the present contribution suggests new methodologies such as interface reconstruction, allowing for example boundary conditions to be prescribed along grain boundary interfaces and distinct localization and representation of grain boundary junctions. Polycrystal plasticity is modeled by considering the evolution of dislocation density in the individual crystals. The influence of grain boundaries on dislocation accumulation is captured in the model, causing the formation of dislocation density gradients within the grains. The model is used in simulations of dynamic recrystallization, taking pure copper as example material. It is shown that the proposed model captures the salient features of dynamic recrystallization during thermomechanical materials processing.